L'Oreal Falls in Paris as Asia Slowdown Drags on Luxury Growthby
Company reports weakest emerging-market growth since 2009
Luxury unit slowdown is temporary, L'Oreal CEO Agon says
L’Oreal SA fell the most in two months after third-quarter revenue missed analysts’ estimates amid slower sales of $62 Kiehl’s moisturizers and $110 Lancome scents in Asia.
Sales rose 3.7 percent excluding acquisitions, disposals and currency swings, the world’s largest cosmetics maker said Thursday after European markets closed. Analysts predicted growth of 4.5 percent, according to the median of estimates compiled by Bloomberg. The shares fell as much as 4.9 percent, the steepest intraday decline since Aug. 24.
Slowing economies in Asia and Latin America have damped consumer spending on everyday items like shampoos and face creams. The Paris-based company’s sales growth in new markets slowed for the second straight quarter to 4.8 percent, the weakest rate in more than six years.
The “miss suggests scale is not a strong enough buffer” against emerging-market volatility, said Cedric Besnard, an analyst at Barclays. “The slowdown in market conditions was bound to impact its top-line growth.”
All divisions trailed estimates with the exception of active cosmetics, one of L’Oreal’s smallest units. Sales at the “Luxe” division, which includes Lancome scents and Urban Decay makeup, rose 4.2 percent, compared with the 6.5 percent gain anticipated by analysts. The rate was the weakest since the fourth quarter of 2010.
L’Oreal’s luxury unit “experienced a temporary slowdown as a result of market turbulence over the summer in Asia, in Hong Kong and in travel retail,” L’Oreal said.
Emerging-market growth was hampered by difficulties in Brazil and by taking over agents’ contracts in the Middle East, L’Oreal said. In China, sales growth was in line with earlier quarters.
L’Oreal also reported lackluster growth in western Europe, where the company should have benefited from an easier base of comparison after poor weather eroded sales in July and August last year.
“The shift in consumer preference away from large, mass-market brands in favor of smaller, niche brands -- also seen in the spirits market -- continues to present challenges for the group,” said Alicia Forry, an analyst at Canaccord Genuity.
Total revenue was 5.94 billion euros ($6.5 billion), in line with estimates.
“We are still confident for the year end,” L’Oreal said, repeating it expects to outpace the market in 2015, and increase sales and profit. The French company said last month it expects the global cosmetics market to grow about 3.5 percent this year, revising a previous estimate of as much as 4 percent.